Saving money can be overwhelming, especially when there are so many things to save for: vacations, a gorgeous new sofa, retirement, and, oh yeah, an emergency fund.
With all of your long and short-term savings goals floating around, simply throwing a bit of money into a savings account every month can seem like the easiest, most hassle-free option. However, with some careful planning and strategic goal setting, you can actually maximize your savings and reach those goals sooner. We’re here to help, so read on for how to maximize your savings.
Establish realistic goals.
As with anything, mapping out goals can make them feel much more manageable. Get started by dividing your goals into three separate buckets: short, medium, and long-term goals. Then, prioritize your needs and wants. You should plan to tackle necessary plans for your emergency fund, retirement fund, and debt repayment first, then determine how much you can spend on other goals, like travel and a down payment for property.
Once you have written down your goals, assign each a timeline. Next, determine how much you will need to save each month to meet those objectives. Make sure they are they realistic.
Create mini rewards and challenges.
If you have trouble staying on track with a savings plan, make room in your budget to include mini rewards for yourself. For example: “If I am able to meet my saving goals three months in a row, I’ll allow myself to add a $50 treat for splurges.” But be sure to include the cost of these motivators in your overall savings plan to ensure these personal bonuses won’t derail long-term goals.
Automate and separate your savings.
Saving really works best if you don’t have to think about it. Having money deposited directly from your paycheck into your savings account makes saving money predictable, and prevents you from procrastinating or just plain forgetting. For most people, out of sight really does mean out of mind.
Start earning interest.
After you have created a manageable plan, it’s time to maximize savings through interest earnings. While interest rates are definitely low, it’s still important to recognize that every dollar you earn in interest is another dollar closer to your goal.
Speaking with a financial advisor about your specific situation is always a smart idea before creating a personalized savings plan, but some great savings options include:
Certificate of Deposit (CD)
CDs are a saving vehicle offered with virtually no risk. Like a savings account, CDs offer a set interest rate. However, unlike a savings account, you cannot withdraw your money whenever you want. In fact, you’ll actually face penalties for withdrawing money before the CD has matured.
If you have trouble keeping your hands off your savings, this may provide the extra motivation to let your money grow. Be sure to shop around and find the best interest rate for the best timeframe that serves your lifestyle.
Money Market Accounts
Money Market accounts are like a checking account with limited withdrawals. These liquid assets earn interest daily on tiered balances with a $5,000 minimum. Unlike CDs, this account is more flexible and allows you to withdraw up to three times a month without penalty. There is not a lot of risk in Money Market instruments and you won’t make a killing in cash return, but the overlying theme is to diversify your portfolio with risk and safe options.
Vacation Savings Accounts
The biggest thing you can do to start saving for your dream summer vacation is open a separate savings account and begin making automatic withdrawals each month to it. Even if you don’t know exactly where you’re headed for vacation, opening this account will give you a jumpstart, and watching that amount grow each month without thinking about it will make spending on your vacation feel that much better.
Holiday Savings Accounts
Set up a Holiday Savings Account and start contributing to it every month so that when the holidays roll around, you already have money in the bank to cover expenses. You can start with something as small as $20 a month and then add to it every few months after you review your budget and financial goals for the year. Saving for specific goals, such as the holidays, is so much easier when you can have a clear vision in mind for what you’re saving for, and when you automate your savings for the goal.
If you need a little extra help staying on track with your savings goals, keep reminders where you can easily see them. Try setting a picture of your dream vacation destination or the dream house you’re saving for as the background of your phone or computer. A visual of what you’re working toward can help nudge you in the direction of making the best financial decisions to get you there. If you need guidance with your financial goals, sit down with Member Services to see what options are available for you.